Hard times for too many Baby Boomers

The last of the baby boomers will turn 50 by the end of the year. Often it is the big   five-0 that starts people to really think about saving for their retirement. So with all of those born in the two decades to 1964 now either retired, or galloping toward it, there are bound to be changes to the economy and society in general. Boomers have changed each life stage they have passed through, and older boomers are redefining what it means to retire. Retire in peace: for many baby boomers retirement may not be as comfortable as they would like. They want to be able to enjoy the lifestyle to which many have become accustomed during their working lives. However, there are challenges. While many have benefited from rising house prices, for many others, the size of their superannuation accounts is not big enough to afford the retirements they would like. More boomers are entering retirement with debt and their adult children are staying at home for longer, which is making it harder to save. Bucket list An online poll was conducted early this year of 1000 people aged 55 plus on behalf of a major super fund. Over half of older Australians said they have a retirement bucket list. Of those with a bucket list:
  • More than half (53 per cent) want to travel the world.
  • Four in 10 (43 per cent) want to go on a road trip.
  • One third (36 per cent) want to visit a world famous attraction or event like Machu Picchu, Niagara Falls or the Rio carnival.
  • One in seven (14 per cent) want to swim with dolphins.
  • 15 per cent want to write a book.
  • One in 10 (11 per cent) want to learn to play a musical instrument.
  • 30 per cent want to leave an inheritance to their children.
Not enough saved A survey on behalf of the same super fund, released early last year, found a disconnect between what boomers expect their retirement to be like and what reality has in store. It found 35 per cent of boomers described themselves are "completely unprepared" for retirement, 51 per cent as "somewhat prepared" and only 14 per cent as financially prepared. In fact a subsequent survey of over 50s found that almost 40% have less than $100,000 saved in super. The Rock and a Hard Place Universal compulsory super only started in 1992, so boomers, older ones in particular, have not had the benefit of the superannuation guarantee over their whole working lives. Evidence suggests that the vast majority of baby boomers will need to rely on the age pension to supplement their retirement income, highlighting the fact that the system came too late for most to get the maximum impact. However, younger boomers are going to be waiting longer for the age pension and the pensioner concessions that come with it. Under current law for those over age 62, the qualifying age for the age pension is increasing and for those born after January 1957 it will be age 67. Additionally, The Abbott government is aiming to further increase the qualifying age for the age pension to 70 by July 1, 2035. The increase will also be phased-in. Home to fund retirement Many boomers will have seen the value of their homes rise considerably, and that is likely to prompt them to think that the house could be the answer to the retirement-saving shortfall. According to the latest MLC Wealth Sentiment survey, released in October, 11 per cent of adult Australians plan to sell the family home to fund their retirement. About 8 per cent said they would draw down equity in their home to help fund their retirements. The others were either unsure what they would do or said they had no plans to sell their homes. A word of warning though, is that many people who sell the family home and then buy an apartment or villa in a retirement complex often find they do not have much left over. Action plan It is never too late to start a plan for retirement, however we have proven with clients – even those who have felt they’re reasonably in control of their retirement planning – that:
  • Professional advice can help clarify what is needed.
  • The earlier a retirement strategy is started the better.
  • We rarely see boomers who cannot make relatively small changes in their weekly budgeting to help them have the lifestyle they want in retirement.
  • It’s usually not just the budgetary changes, but how they can make little changes on all aspects of their financial affairs that really makes the difference.
We start the process by preparing modelling for the client that shows the outcome if they keep doing what they are doing. The modelling then helps show how, by making some small changes, such as spending a bit less, they will be able to live better in retirement. Our first meeting is obligation free, so please feel free to give our office a call on (07) 3223 6000. We will arrange a time to meet and discuss your particular requirements in more detail.

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